RED DEER, Alta. – Hog producers are bracing for another year of falling prices, which could be the last straw for those already deeply in debt.
“Everybody thought it was going to be much better, but obviously it’s not happening. It’s going to get worse,” said Paul Hodgman of the Alberta Pork Producers Development Corporation.
A study by Toma and Bouma Market Consultants in Edmonton calculated Alberta hog producers lost $64 million in cash outlay costs since Oct. 1, 1998 to July 11 this year. Break-even is $1.35 per kilogram.
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“We’re still in big trouble,” Hodgman said.
Current losses are about $1 million per week.The study concluded that if prices fall to 1998 levels, total losses could exceed $100 million.
Part of the problem is due to Canadian attempts to compete with the behemoth American system of integrated hog production, the study said.
Little improvement
Canadian cash prices are set by the United States market. With continued growth in that sector, it is difficult to expect an improvement since a high percentage of hogs are sold on a confidential contract basis.
“Too much pork in Alberta is traded on the cash market,” said study author Gerry Bouma.
The industry wants to save the independent family farms but if this crisis continues, they will be gone and their communities won’t be far behind, said Fred Olthuis, chair of the pork producers corporation.
All the while retail prices remain high. At one time, producers received 37 percent of the retail dollar. Last December when prices hit rock bottom, that share was 12 percent.
“Looking at our forward prices and our predictions for 1999, I don’t think we’re going to do any better than 1998,”said Olthuis at a Red Deer news conference.
The past 39-month price cycle is not as predictable as former cycles, he said. High prices are much higher than usual, but the lower prices are deeper than ever before.
The selling price for Alberta hogs for July 15 delivery was $1.04 to $1.10 per kg, about 20 to 30 cents below the cost of production.
The Western Hog Exchange forward prices as of July 14 show a lower trend right up until next June when the price closes at $1.23.
The worst prices are throughout the winter months starting in November at 82 cents through a February close of 96 cents.
Alberta’s hog agency plans to meet with government, retailers and bankers to prevent a sequel to last year’s price crisis.
A meeting with Alberta agriculture minister Ty Lund is scheduled within the next two weeks to discuss improved safety nets and support for the floundering industry. Last winter the government provided emergency loans of up to $50,000 per producer. The agency also wants to re-address safety nets because averaging income over three years when calculating disaster payments is not working. The hog producers prefer a five-year averaging period.
A meeting is scheduled with the Canadian Bankers Association in August.
